A BUSINESSMAN from Cheshire is at the centre of an investigation after he bet £6 million that shares in his own company would go up in value.

Paul Davidson, who lives near Macclesfield, put the money on a spread bet - gambling on an increase in the share price of his biotech company Cyprotex.

Following the bet, the company was transformed into a £26.2 million public group overnight.

Mr Davidson, a former pipefitter, made his money by inventing a pipe connector which allows radiators to be swivelled forward without being disconnected, making it easy to wallpaper or tile behind them.

Spread betting on shares involves gambling on whether a share value will be higher or lower than a price bracket predicted by a betting firm on a given date.

Punters who think the price will be higher than that predicted will win money for every penny over the predicted share price and lose money for every penny under the one quoted.

The 46-year-old insists his gamble was an innocent bet. But following demands from investors, the Financial Service Authority (FSA) has said it will launch an investigation.

The FSA will investigate whether Mr Davidson's spread bet made the difference between the flotation going ahead or failing as following the mammoth gamble the betting firm City Index bought shares in the company to offset their possible losses if the shares went up.

One theory is that City Index's investment, which amounted to almost 20 per cent of the firm, actually ensured the flotation's success.

Mr Davidson owns 31,750,000 shares in Cyprotex.

At his £4 million manor house, where he lives with his wife Karen and children James, 18, and Lauren, 15, Mr Davidson said: "Spread betting is a bit of fun. I'm not a gambler, I only bet on FTSE-100 companies and before all this I was £2 million up on my bets.

"I asked City Index if there was anything which said I couldn't bet on a company I owned shares in and was told to take legal advice."

Mr Davidson said lawyers told him the bet was legitimate. He insisted he had no idea that City Index would order the purchase of shares to cover their backs.

Mr Davidson, who faces an unlimited fine if found guilty by the FSA, bought Cyprotex last year for £100,000, pumped in £1.5m and appointed new directors. They decided to float the firm on February 14 this year. Mr Davidson placed his bet that the share price would go up before flotation. The 29p issue price rose to 30.5p on March 4 but today was 29p.